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CBN Forex Supply Forces Demand to Drop

By on April 21, 2011

Concerned that the violence,  which erupted after Saturday’s Presidential election may push up demand for foreign exchange in the country, the Central Bank of Nigeria (CBN) Wednesday increased its supply of foreign exchange at the Wholesale Dutch Auction System (WDAS).

THISDAY check revealed that the move by the regulator dragged down the burgeoning demand that had been observed at the regulated bi-weekly auction.

Further findings showed that whereas the regulator offered $400 million Tuesday as against the $300 million offered on Monday, demand for the greenback by the 17 banks that participated in the auction reduced to $324 million   compared with the $431 million at Monday’s auction.

Currency Dealers said the step taken by the banking watchdog following the volume offered was to show that the apex bank has enough reserves to meet market demand in its defence of the local currency which according to them would help protect the naira.

However, the naira fell marginally against the dollar at the WDAS as it slipped by 28 kobo to N153.46 to a dollar Wednesday, compared with the N153.18 to a dollar it stood at Monday’s auction. The local sustained its previous day’s value at the interbank market as it closed at N154.65 to a dollar.

Meanwhile, the Asset Management Corporation of Nigeria (AMCON) said it would list its N1.7 trillion zero coupon bonds on the Nigerian Stock Exchange (NSE) Thursday.

A letter signed by the NSE’s spokesman, Mr. Wole Tokede Wednesday showed that the zero coupon bond 2013 series 1 would be offered at N1, 000 per share.

AMCON had completed its bond issuance about two weeks ago, attracting yields significantly below equivalent government treasuries.  It had issued the 3-year zero-coupon bonds in three tranches.

AMCON was set up last year to absorb banks’ Non Performing Loans (NPLs) , exchanging them for government-backed bonds, with the aim of rebuilding commercial bank balance sheets after the 2009 banking reform. AMCON had said that it would hold the assets for at least two years before selling them, and when it wants to sell them, the transaction will be announced and publicized so that nothing untoward happens.

Managing Director and Chief Executive Officer, AMCON, Mr. Mustapha Chike-Obi had reiterated that the corporation was on track to soak up all bad credit in the banking sector.

He had also said that the ‘bad’ bank is focused on the end of second quarter recapitalising target for the industry.

Source : Thisday